|Mohawk Industries, Inc. Announces Second Quarter Earnings|
CALHOUN, Ga., Aug. 5, /PRNewswire-FirstCall/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2010 second quarter net earnings of $68 million and diluted earnings per share (EPS) of $0.99 which included non-recurring tax benefits, charges for redemption premiums on bonds and restructuring activities. Excluding these unusual items, net earnings and EPS would have been $53 million and $0.77 per share. In the second quarter of 2009, the net earnings were $46 million and EPS was $0.67. Excluding the 2009 unusual items, net earnings and EPS would have been $54 million and $0.79 per share. Net sales for the second quarter of 2010 were $1.4 billion which was flat versus 2009 net sales. Our operating margin has improved to 6.4% (6.8% adjusted) and is the highest we have achieved in two years. We have a strong financial position with free cash flow of $111 million in the quarter, cash of $343 million and an improving net debt to EBITDA ratio of 2.1.
For the first six months of 2010, our net earnings were $89 million or an EPS of $1.29. Excluding the unusual items noted above, net earnings would have been $77 million and EPS would have been $1.12. In the first six months of 2009, our net loss was $60 million and loss per share was $0.87. Excluding the 2009 year-to-date unusual items, net earnings and EPS would have been $64 million and $0.93 per share. Net sales for the first six months of 2010 were $2.7 billion representing a 5% increase from 2009. On a local exchange rate, constant days and excluding 2009 sales adjustments net sales decreased 2.5% during this period.
In commenting on the second quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "Our earnings were better than anticipated due to higher sales in Unilin, improving product mix in Mohawk, price increases and cost reduction programs. Our second quarter sales were flat compared to the prior year as the residential business improved. The European business grew in most geographic and product categories with volumes increasing. Commercial markets are declining at a slower rate with expectations of a bottom this year. Residential remodeling markets should expand in the second half of the year driven by higher disposable income and low interest rates. New home construction remains low but above last year. The European economy is gaining momentum with positive industry reports, higher consumer confidence and an improved banking outlook. We have expanded our international presence with a minority interest in one of the top ten Chinese ceramic tile manufacturers and purchased a building in Russia for laminate manufacturing."
Our Mohawk segment net sales were down 3% and operating income was up $11 million before restructuring charges for the period. Profitability has improved as price increases, product mix, productivity improvements and cost reductions resulted in higher margins. Our residential product introductions shipped earlier this year and should improve our volume in the second half of the year. Our commercial team's selling efforts are focused on the government, healthcare and education markets. Our focus continues on improving quality, product management, service and costs. Our second price increase this year of 5-7%, announced in April, is being implemented to offset higher cost raw material.
Our Dal-Tile segment net sales were down 3% as a result of new residential construction and commercial still lagging the economy. We are improving manufacturing output, increasing productivity and lowering SG&A costs to expand margins. Our Home Center share is growing and we are strengthening our position in Mexico by broadening our product offering and customer base. In manufacturing, we have increased labor productivity and energy utilization with process innovation.
In Monterrey, Mexico, a flood caused by Hurricane Alex temporarily stopped our ceramic tile production in the beginning of July. Most of the equipment has been repaired and most will be back at full capacity within a month. Shipping was not interrupted by the flood since our finished inventories are stored at another site. We believe our aggressive actions will result in a minimal impact from the storm on our customers and performance due to product substitutions, moving production, sourcing products and coverage from our insurance.
Our Unilin segment net sales increased 10% as reported or 16% in local currency. Our business improved in most European markets, Russia and Asia with nearly all product categories growing compared to last year. Quick Step laminate is positioned as the leading brand with innovative products and a strong market presence. New licensees have adopted our patented installation system utilized in laminate, wood and vinyl products. Both, our U.S. and European wood sales have grown and the sales mix has improved. We have implemented multiple price increases in wood this year to recover the inflation of our raw materials.
The U.S. and European economies are expected to expand in the second half of the year. We believe product pricing will catch up with the inflation of our raw materials. Our new product introductions will benefit our sales while cost reductions and price increases will improve our margins. We believe raw material prices have peaked in the second quarter and our results should benefit as we go through the year. In the Unilin segment, the third quarter is seasonally slower due to the European holiday. Our third quarter guidance for earnings is $0.70 to $0.79 per share excluding restructuring charges, the timing of insurance reimbursements and purchase accounting adjustments.
In conclusion, global economic growth should benefit our business in the future as markets continue to recover. The execution of our product introductions and cost initiatives will support expansion of our profits. Increased exposure to international markets will drive growth and provide a better balance to our company. Our cash flow remains strong and our balance sheet will support continued investment in new opportunities.
Mohawk is a leading supplier of flooring for both residential and commercial applications. Mohawk offers a complete selection of carpet, ceramic tile, laminate, wood, stone, vinyl, and rugs. These products are marketed under the premier brands in the industry, which include Mohawk, Karastan, Lees, Bigelow, Dal-Tile, American Olean, Unilin and Quick Step. Mohawk's unique merchandising and marketing assist our customers in creating the consumers' dream. Mohawk provides a premium level of service with its own trucking fleet and over 250 local distribution locations.
Certain of the statements in the immediately preceding paragraphs, particularly anticipating future performance, business prospects, growth and operating strategies and similar matters and those that include the words "could," "should," "believes," "anticipates," "expects," and "estimates," or similar expressions constitute "forward-looking statements." For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ: changes in economic or industry conditions; competition; raw material and energy costs; timing and level of capital expenditures; integration of acquisitions; rationalization of operations; claims; litigation and other risks identified in Mohawk's SEC reports and public announcements.
There will be a conference call Friday, August 6, 2010 at 11:00 AM Eastern Time.
The telephone number to call is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local. Conference ID # 87173114. A conference call replay will also be available until August 20, 2010 by dialing 800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 87173114.
CONTACT: Frank H. Boykin, Chief Financial Officer, +1-706-624-2695